YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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Equity Release will reduce the value of your estate and can affect your eligibility for means tested benefits.

Lifetime Mortgages are currently the most popular type of equity release scheme. The information below is an overview including the advantages and disadvantages.

Summary

A lifetime mortgage is when you borrow money that is secured against your home, providing it is your main residence and you are the homeowner(s).
You can still put aside some of the value of your property as an inheritance for your family.
When you die or move into long-term care, the home is then sold and the money from the sale is used to pay off the loan. Anything left will go to your beneficiaries. If there is not enough money left from the sale to pay off the mortage, your beneficiaries would left to pay any outstanding debt.
Most lifetime mortgages offer a no-negative-equity guarantee (Equity Release Council standard) to guard against the sale of the house not being enough to pay the mortgage. This guarantee means the lender ensures that you (or your beneficiaries) will never have to pay back more than the value of your home.

 

Advantages

  • Enables you to release some of your home’s value but live in your home for the rest of your life rent free.
  • Under a Lifetime Mortgage you can choose to either pay the interest each month to avoid the debt increasing or simply allow it to be continually added to the amount borrowed.
  • Any money released is TAX FREE.
  • The ‘no-negative equity guarantee’ offered by all Equity Release Council schemes means you can be assured that any debt you create, plus any ongoing interest which you might elect to add to the amount borrowed, will never become more than the property’s future value when you die

 

Disadvantages

  • Equity release schemes involve borrowing against your home and may work out more expensive in the long term than downsizing to a smaller property.
  • Equity release may affect your entitlement to state benefits and grants.
  • Releasing equity will reduce the value you have in your home and therefore the amount of inheritance you will be able to leave. It can also make the process of leaving your property to beneficiaries more difficult
  • Should you wish to end the plan it may be difficult and you may incur penalties to do so.